There’s not much doubt where the biggest threat to global economic stability
comes from right now – it’s the pesky euro

Central banks tend on the whole not to trespass on each other’s territory; it’s just not thought polite among this small elite of monetary witch doctors. Just lately, however, it seems to have become something of a habit. First to break the taboo was Raghuram Rajan, Governor of the Reserve Bank of India, who strongly criticised the manner of US Federal Reserve tapering for the chaos it was inflicting on some emerging markets.

Now comes the Bank of England’s Mark Carney, who admittedly wasn’t having a go at his long-standing friend and opposite number at the European Central Bank, Mario Draghi, as such, but at something that might be thought even more of a no-go area for a central banker – the whole political construct of the eurozone. He’s hardly the first to express such frustration.

Tim Geithner, US Treasury Secretary at the height of the eurozone sovereign debt crisis, later said that he had “completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable they would let it get as bad as they ultimately did”.

But they did, and have been continuing in much the same vein ever since. Some might argue that Mr Carney should first address the mote in his own eye before taking aim at allies across the Channel. Yet on two grounds he has every right to complain. Mr Carney is also chairman of the international Financial Stability Board, and there is not much doubt where the biggest threat to global economic stability comes from right now – it’s the pesky euro.

Yet perhaps the more important reason is our own UK economy, whose fortunes are sadly still joined at the hip to those of Europe.

It’s laughable that so much energy is still expended by the economics profession on Britain’s own fiscal austerity agenda, and the supposed damage it has done to economic growth and incomes. Larry Summers, another former US Treasury Secretary and in most respects bar this one an undoubted genius, was at it again in Davos the week before last.

The truth is that slow recovery in Britain has little or nothing to do with Coalition austerity, such as it is. It’s all about what’s happening in Europe. As is now apparent, the eurozone crisis has not gone away; it was only sleeping.

Even assuming some kind of a compromise is reached to feed the emaciated Greeks, it’s not going to solve the underlying problem. Europe has condemned much of its hinterland to apparently never ending depression, requiring Britain constantly to stimulate its own domestic demand to show any growth at all, even though we remain one of the most unbalanced economies in Europe and in the long term can ill afford it.

So keep up the criticism, Mr Carney. To misquote Richard Nixon’s famous remark about Keynsians, we are all Syriza supporters now.

Well, sort of. As far as I can see, Alexis Tsipras, the Syriza leader, proposes merely to replace one kleptocracy, the oligarchs, with another, unaffordable public subsidies and an ever expanding state. Even so, someone has to bring this eurozone madness to a head, and if it is an unreconstructed Marxist, so be it.

Golden Apple

Having just produced the biggest ever quarterly profit in corporate history, Apple’s chief executive, Tim Cook, might reasonably have expected some plaudits. Ever since the death of Apple’s founding father, the otherwise super-human Steve Jobs, people have been expecting Apple to stumble. But so far it has shown no sign of it, turning into a cash cow of unimagined proportions. Even the financiers are turning green with envy. They cannot quite work out how Mr Cook has managed it, and there is not a trick in the book they don’t know about. At the last count, Apple had $178bn sitting on its balance sheet, enough to settle Greece’s debt problems once and for all – until the next time, that is.

For how much longer can Apple keep this up? Not long is my bet. For Apple is, of course, still living off the Steve Jobs’ legacy. The new Apple watch will no doubt be a hit – the consumer’s love affair with the Apple brand is not to be underestimated – but it hardly looks a convincing replacement for the company’s virtual monopoly of the smartphone market. And this will soon be under sustained attack.

Yet Mr Cook didn’t even get the chance to enjoy his moment in the sun while he could. No, the prevailing narrative almost everywhere was how dare he make so much money, and how dare Apple pay so little tax. The answer to both questions is because the market still allows them to, and thank goodness for that.

Despite rampant avoidance, corporation tax remains one of the bigger sources of government revenue in virtually all advanced economies. It was never a satisfactory form of taxation, for profit is in many respects just accounting trickery. We’ve got better at measuring it, but if you really want to know how well a company is doing, look at cash generation and return on capital, not the profit and loss account. In any case, from a tax perspective, it remains wide open to manipulation, which is how some companies, and particularly big global ones, manage so deftly to avoid it.

Personally I’ve not got a lot of problem with this – countries most open to avoidance tend to attract the greater share of foreign direct investment, so the economy as a whole gains. However, there is no doubting that it is extraordinarily unfair on those in no position to avoid it. Avoidance therefore distorts competition. In an increasingly global economy, corporation tax is basically a broken system, which only still exists because it raises so much money. If society demands that we tax business, let’s please find better ways of doing it.

Dividend yield

Talking of cash gushers, my thanks to Fidelity’s Maike Currie for pointing out one of those fascinating, and potentially quite worrying “not many people know that” facts about UK dividend payments. In the fourth quarter of last year, just three companies – Shell, BP and HSBC – accounted for three fifths of all UK dividends.

Admittedly, the numbers were somewhat distorted by the timing of the HSBC payouts, but the substantive point remains the same; UK dividend payments are substantially reliant on a handful of big companies to swell their size.

Two of those companies, moreover, rely for their income on a commodity product which has more than halved in price over the last six months. Neither has yet intimated that it is about to cut the dividend in response. For the time being, investment spending is being slashed instead – a further $15bn over the next three years was announced by Shell only last week.

In time, these cuts, which are industry-wide, ought to lift the oil price off the floor. In the meantime, however, both Shell and BP are burning through their reserves much more rapidly than they are replenishing them. As my colleague Tom Stevenson points out on B4, equity income fund investors beware.